Admissible Trading Strategies Under Transaction Costs

DOI10.1007/978-3-319-11970-0_11zbMATH Open1390.91286arXiv1308.1492OpenAlexW1531279877MaRDI QIDQ4568490FDOQ4568490

Authors: Walter Schachermayer 

Publication date: 21 June 2018

Published in: Lecture Notes in Mathematics (Search for Journal in Brave)

Abstract: A well known result in stochastic analysis reads as follows: for an $mathbbR$-valued super-martingale $X=(X_t{)}_{0leqtleqT}$ such that the terminal value $X_T$ is non-negative, we have that the entire process $X$ is non-negative. An analogous result holds true in the no arbitrage theory of mathematical finance: under the assumption of no arbitrage, a portfolio process $x+(HcdotS)$ verifying $x+(HcdotS{)}_{T}geq0$ also satisfies $x+(HcdotS{)}_{t}geq0,$ for all $0leqtleqT$. In the present paper we derive an analogous result in the presence of transaction costs. A counter-example reveals that the consideration of transaction costs makes things more delicate than in the frictionless setting.

Full work available at URL: https://arxiv.org/abs/1308.1492

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Mathematics Subject Classification ID

Portfolio theory (91G10) Martingales with continuous parameter (60G44) Stochastic integrals (60H05) Applications of stochastic analysis (to PDEs, etc.) (60H30)

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Cited In (12)

• Duality theory for portfolio optimisation under transaction costs
• Extended weak convergence and utility maximisation with proportional transaction costs
• Utility maximization problem with random endowment and transaction costs: when wealth may become negative
• No arbitrage of the first kind and local martingale numéraires
• The super-replication theorem under proportional transaction costs revisited
• Asymptotic arbitrage with small transaction costs
• Super‐replication with transaction costs under model uncertainty for continuous processes
• On the existence of shadow prices for optimal investment with random endowment
• Admissible investment strategies in continuous trading
• A dynamic version of the super-replication theorem under proportional transaction costs
• Optimal investment with random endowments and transaction costs: duality theory and shadow prices
• Asset price bubbles in markets with transaction costs

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